Oil falls below $80 as recession fears rise

Oil fell as much as 5.7% to $78.73 a barrel — the lowest intraday level since January 11.

Investors are worried about the Federal Reserve’s campaign to control inflation by issuing punitive interest rate hikes designed to slow the US economy.

“They are sending this economy into recession on purpose,” said Robert Yawger, vice president of energy futures at Mizuho Securities.

Markets are betting that the Fed’s rate hikes — the latest of which comes this week — will hurt energy demand as people drive and fly less and businesses use less energy.

“Fed rate hikes are killing demand for everything, especially energy,” Yawger said.

Gasoline prices fell for 98 straight days until Wednesday, before gradually rising. The national average for regular gasoline rose to $3.69 on Friday, according to AAA. That’s below the June 14 peak of $5.02.

The fall in the energy market is partly fueling a rally in the US dollar, which continues to rise against rival currencies as investors flock to safe havens. This force is usually negative for oil – which is priced in dollars – because it erodes the purchasing power of foreign buyers.

“The market says, ‘If we go into recession, we go into the dollar and sell everything else.’ Oil is getting into that,” said Michael Tran, commodities and digital intelligence strategist at RBC Capital Markets.

Oil prices have fallen about 40% since eclipsing $130 a barrel in March, as investors worried that the war against Ukraine would curb Russian oil exports. Fears about oil supplies from Russia have proven to be overblown as the country continues to send crude abroad.

The Biden administration’s unprecedented emergency release of oil from the national stockpile has also helped oil sales.

“That definitely helped. That’s one reason we’re not at $130 anymore,” Yawger said.